For the most part, the consensus in the media seems to be that the housing market is showing some sort of tenuous "stabilization". When I Googled "housing market" this morning, here’s what the main headlines looked like:
Over the past year, the government has intervened heavily at essentially every stage of the home-buying process. In fact, more than 80% of the new residential mortgage loans made this year benefited from some form of government support, according to the trade publication Inside Mortgage Finance.
To keep funds flowing to the housing market, the government bailed out Fannie Mae and Freddie Mac last year and now effectively owns the mortgage finance giants and their combined $5.4 trillion in loans and guarantees. To keep mortgage rates low, the Federal Reserve is on track to purchase nearly $1.5 trillion in debt issued or guaranteed by the government’s various mortgage arms and an additional $300 billion in Treasurys, which set the benchmark for home lending.
And to boost sales, the government also is offering $8,000 tax credits to first-time home buyers.
Those efforts appear to have had the intended effect of braking the housing market’s plunge.
"At least for the next two years, and possibly longer, it is not possible that the government would say: ‘The U.S. mortgage market no longer needs our support,’" says Dwight Jaffee, an economics professor at the University of California Berkeley’s Haas School of Business. "Were they to say that, the mortgage market and the housing market would almost surely crash."
Even if government support stays in place though, it’s unlikely the housing will improve much from here:
"Gains from here on will probably be much more difficult to achieve" due to high unemployment, tight credit and the large number of homes already on the market, he said.
Real estate analysts said that tight lending standards for borrowers and builders could threaten the real estate recovery.
Foreclosures are another big unknown. Prices were pushed down last year by an abundance of bank-owned properties hitting the market. With unemployment nearing 10 percent, there are probably more foreclosures to come.
What will keep a lid on anything resembling recovery is the massive inventory. Houses were built at a ridiculous rate during the boom to meet a demand created by rampant speculation, not by a need to shelter our populace. Household formation is down. Consumer interest is down. Until we need more shelter, we won’t need more housing.
The government can only do so much by keeping loans available. Until real demand, not speculative interest is back, the market will not be back. Should the government withdraw life support, the "recovery" will disappear. What remains to be seen is how long the government is willing/able to keep it up.